What is the basic purpose of offering customers cash discounts such as 2/10, n/30. is it to Increase sale or to Reduce net sales.
by 
socrates
ANSWERS: 1
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It is to receive the cash sooner than it would normally be expected. If you offer a 2% discount for paying in 10 days instead of the usual 30 days, some customers will pay early. The kicker is that only the larger invoices will make the early payment worthwhile. If you have a $200 invoice, the discount is only $4.00 , but if you have a $20,000 invoice, the benefit to paying early is $400. If you are the payer, you have to decide if your own cash flow can advance the money 20 days early. If you are the creditor, you have to be prepared to swallow the discount on your largest outstanding accounts.
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